ENDORSEMENT

COURT FILE NO.: CV-14-495787

DATE: 20140819

RE: Christian Chijindu and Nkiruka Ochei, Applicants

AND:

Prudential Property Management Inc., Respondent

BEFORE: Carole J. Brown J.

COUNSEL: Matthew Onaemu Tubie, for the Applicants

David G. Boghosian, for the Respondent

HEARD: August 18, 2014

[1] The applicants seek a declaration pursuant to a Mortgage Commitment Letter dated June 26, 2012. The applicants sought to obtain the credit facility as a construction loan. The applicants seek a declaratory order that the $19,000 which the respondent charged on account of a "Lender's Administrative Fee" for a mortgage loan advanced to them contravenes the express terms of the contract between the parties. They further seek an order directing that the respondent refund to the applicants the overpayment on account of the Lender's Administrative Fee.

[2] It is the position of the applicants that the respondent agreed to advance money to the applicants in five installments, subject to the applicants meeting certain stipulated conditions as regards each of the draws. These conditions are set forth in the Commitment Letter and at Sch. A attached thereto. It is their position that for advancing the money, it was agreed by the parties that the respondent would charge 4% of the money advanced as a "Lender's Administrative Fee". They submit that the respondent only advanced the first draw of $150,000 but, nevertheless, charged $19,000 as the Lender’s Administrative Fee which is 12.67% of the amount advanced, rather than 4%.

[3] It is the position of the respondent that the applicant's position is contrary to the plain meaning of the Mortgage Commitment Letter signed by the applicants which indicates that the Lender's Administrative Fee of $19,000 was payable irrespective of the amount actually drawn by the applicants.

[4] An application pursuant to Rule 14.05(3)(d) of the Rules of Civil Procedure may be brought for determination of rights that depend on the interpretation of a deed, will, contract or other instrument.

[5] Such an application is appropriate where there are no material facts in dispute. The parties are in agreement that there are no material facts in dispute and that this application is appropriate in the interpretation of the subject Mortgage Commitment Letter and the provision as regards the Lender’s Administrative Fee.

[6] The parties agree with the basic principles of interpretation of the contract. They are in agreement that the terms of the contract are clear and unambiguous, such that no extrinsic evidence is necessary or permissible. They are further in agreement that the subjective intention of the parties at the time the contract was drawn is not relevant. In this regard, they refer me to Dumbrel v Regional Group of Companies Inc., 2007 ONCA 59, 2007 85 O. R. (3d) 616 (C.A.) at paragraph 50.

In interpreting a contract, the focus is on the meaning of the words used in the contract. At least in the context of commercial relationships, it is not helpful to frame the analysis in terms of the subjective intention of the parties at the time the contract was drawn. Emphasis on subjective intention denudes the contractual arrangement of the certainty that reducing an agreement to writing was intended to achieve. Moreover, many contractual disputes involve issues on which there is no common subjective intention between the parties. The purpose of the interpretation of the contract is not to discover how the parties understood the language of the text which they adopted, but rather to determine the meaning of the contract against its objective contextual scheme.

[7] The Mortgage Commitment Letter sets forth the following terms:

Mortgage Amount: $475,000

Interest Rate: 9.50% per annum calculated monthly, not in advance

Term/Amortization: Maturity date of August 1, 2013

Disbursement of Funds: Funds are to be dispersed as per the following draw schedule:

Draw #1 July 4, 2012 $150,000

Draw #2 November 30, 2012 $55,000

Draw #3 December 28, 2012 $120,000

Draw #4 January 31, 2013 $65,000

Draw #5 February 28, 2013 Balance

If the funds are not availed by the borrower for any reason whatsoever as per the above draw schedule, lender shall have no obligation to release funds; however if the lender chooses to disburse funds, a 1% per month penalty shall apply to funds from the date of scheduled disbursement to the date of actual disbursement. Each draw shall be subject to the conditions set out in Schedule "A", and individual draws will also be subject to the following additional conditions: …

Lenders Administrative Fee: $19,000 plus $350 Draw Fee for draw 2, 3, 4 and 5

Non-Refundable Deposit: $3000 (provided already and considered fully earned; will be applied towards Lender's Administrative Fee).

[8] The applicants submit that the respondent only advanced the sum of $150,000 for purchase of the parcel of land and that they notified the respondent in February of 2013 that they did not intend to borrow further on the Mortgage Commitment Letter. They requested a discharge notice and that a portion of the Lender's Administrative Fee be reimbursed, as they did not borrow the full $475,000. The respondent advised the applicant in writing that the Administrative Fee was an amount fully earned at the time of placement of the loan.

[9] The applicant states, in his affidavit, that he "understood" from the loan agreement that the $19,000 Lender's Administrative Fee was based on $475,000, but not on a lesser amount as per the commitment letter. Further, he states that it was "our understanding" that they would not be charged a fee for money not advance. The applicant does not state how this was understood and, in any event, under a Rule 14.05 application, the analysis is on interpretation of the instrument itself. Intention of the parties is not considered in interpreting the contract.

[10] The Mortgage Commitment Letter is clear and unambiguous on its face. It clearly stipulates the Lender's Administrative Fee to be $19,000. The amount of the Lender's Administrative Fee is not made dependent on the amount advanced by the lender. It is stipulated as a flat fee with additional "draw fees" of $350 to be charged for each of the five draws up to $475,000. There is nothing in the wording of the agreement to indicate that the "principal amount" of the loan agreement is only that portion advanced at any given time, nor that the Lender's Administrative Fee is to be paid only on that portion advanced at any given time. Nor is there a provision for a “refund” of a portion of the fee.

[11] A Lender's Administrative Fee is standard in the mortgage business and is charged and payable on the loan facility being put in place. It is an administrative fee which represents payment for the mortgage broker's contacting of its due diligence for purposes of the loan and for arranging the loan through a lender.

[12] While the applicant submits that the Commitment Letter must be interpreted in light of subsequent documents, including the Charge/Mortgage registered on title and the Draw Down Request, I do not agree. The governing document is the Mortgage Commitment Letter signed by both parties on June 26, 2012. It is based on that document that interpretation of the contract occurs.

[13] In my view, based on the clear wording of the Mortgage Commitment Letter, there is nothing to indicate that the Lender's Administrative Fee was tied to only the amounts advanced as draws rather than the mortgage amount stipulated in the letter. There is nothing in the Commitment Letter stating that the Administrative Fee payable is subject to a percentage of the draws taken by the lender rather than the mortgage amount. It is clearly stated to be an administrative fee. While additional fees of $350 per draw are to be charged at the time of each subsequent draw, the administrative fee is not stipulated in the contract to be based on or tied to advances or draws, but is payable as an administrative fee, fixed at $19,000.

[14] Based on all of the foregoing, I dismiss the application.

[15] The parties have provided their costs outlines. The respondent was wholly successful in defending its Application and is entitled to its costs. The respondent seeks its costs on a substantial indemnity basis in the total amount of $9,325.94, relying on clause 12.2(c) of the Mortgage/Charge Schedule of Payments Provisions appended thereto which states:

12.2 The Borrower shall pay to the Lender on demand all legal fees payable, on a substantial indemnity basis, costs and out-or-pocket expenses incurred by the Lender, its agents, offices and employees with respect to:

(c) the exercising of any or all of the rights, remedies and powers of the Lender under this Mortgage or any of the instruments and documents comprising the Documents or relating thereto, in defending or taking any measures to defend any action, claim, cause of action or in proceedings directly or indirectly relating to the provisions of any such instrument or documents.

[16] I am of the view that the respondent is entitled to its costs on a substantial indemnity basis.

[17] I find the amount sought to be reasonable in comparison with the applicant’s Bill of Costs, which seeks total partial indemnity costs of $16,226.80 and substantial indemnity costs of $22,238.40, both of which amounts are substantially more than the costs sought by the respondent.

[18] The applicants are ordered to pay to the respondent, its costs in the total amount of $9,325.94.

Carole J. Brown J.

Date: August 19, 2014